Sideways Summer

July 10, 2018 by Justin Sautter

Greetings! I hope your summer is off to a terrific start.

Trade, technology (privacy), and earnings remain top headlines. Additionally, many of the pundits and financial press are fixated on the question of recession. I certainly do not see one right around the corner, nor do I think when it comes it will pack anything like the punch of the 2008 “Great Recession.” It is important to recall that not all recessions are as long or as widespread as the last one.

So far, the Dow and the S&P 500 peaked in January of this year and since then have been range bound, essentially trading sideways. The technology heavy Nasdaq has continued to make gains. At this writing, both the S&P and the Nasdaq are at crucial spots on their charts. A push a little higher would be a break-out and point to new gains to come, while a breakdown would confirm sideways movement remains the norm. I suspect earnings will be the key here, and it appears likely that we will see good numbers for the next 2-3 quarters.

Bond markets have had a very tough 2018. Year-to-date U.S. High Yield has been the top performer, up a meager 0.2%, while Emerging Market debt in local currency produced a -6.4% return. Corporates saw a -3.3% return and the Barclays Aggregate returned -1.6%, a tough pill to swallow given it has a 10-year annualized return of 4%. Clearly these non-correlated assets have been a drag on performance this year.

For more data see the table below that highlights returns for major asset classes. Please don’t hesitate to call anytime to discuss your investments or other aspects of your finances.

Best Regards,

Justin Sautter 

2018 Q2 Returns for Key Asset Classes and a Diversified Portfolio:

Fixed Income -1.6%
Cash 0.8%
High Yield Bonds -2.5%
REITS 1.3%
International Equity  -2.4%
US Large Cap 2.6%
US Small Cap 7.7%
Emerging Equity -6.5%
Conmmodity 0.0%
Asset Allocation 0.3%

Diversifited (Defined as 60% Equity, 35% Bond, 5%Commodity)

Source: JP Morgan GTM 1Q2017